Mark Stephenson, Extension Dairy Policy Analyst
Center for Dairy Profitability
Department of Agricultural and Applied Economics
UW-Madison College of Agricultural and Life Sciences
First in a series for the 2018 Wisconsin Agricultural Outlook Forum on Jan. 25, 2018
Agenda and registration information: https://renk.aae.wisc.edu/ag-outlook-forum/
2:56 – Total time
0:09 – Snapshot of dairy economy
0:39 – How does this impact Wisconsin dairy farmers
1:10 – Dairy farmer decision-making
1:54 – Wisconsin dairy farmers compared to other regions
2:48 – Lead out
Lorre Kolb: We’re visiting today with Mark Stephenson, Center for Dairy Profitability, University of Wisconsin-Madison/Extension in the College of Agricultural and Life Sciences. Mark can you give us a snapshot of what’s happening in the dairy world?
Mark Stephenson: Well the dairy world, writ large, meaning U.S. and other major milk producing countries is producing a lot of milk right now and there’s quite a bit of dairy product in storage so unfortunately that’s keeping our price trough around for a period of time. We had some recovery this last year; 2017 was better than the year before, but this year I think we’re going to anticipate another decline in prices.
Lorre Kolb: So what does this mean for the dairy farmers in Wisconsin and what does it mean regionally?
Mark Stephenson: Well dairy farmers in Wisconsin have been experiencing some differential kinds of effects. This has been a price that has been break-even or slightly below for a lot of farms and maybe a little above for others that have lower costs. But since it’s been persistent for three years, it’s starting to really impact production decisions and I think that some farms are going to be facing harder choices when it comes to operating loans this spring.
Lorre Kolb: What do you see for dairy farmers and the decisions that they’re making?
Mark Stephenson: Well our price rebounded about a dollar thirty in 2017 compared to 2016. But I think we’re going to take most of that back by the time we get through this next year, I expect that we’ll see a dollar off of the Class III price and because premiums also have been eroding, maybe as much as a dollar thirty off of the farm milk price so a lot of that is just going to come on farms so it is just going to be a watch your expenses and keep your costs down as best you can. The likelihood is that by the time we get in the last quarter or the second half perhaps of 2018 we’l l have some price recovery.
Lorre Kolb: How do the farmers of this region compare to dairy farmers elsewhere?
Mark Stephenson: Well, we’ve had a lot of growth in milk production. We’ve continued to see this right through this entire time period and that’s part of the reason that we’re seeing this downward pressure on milk premiums because dairy plants are not starved for milk right now and Michigan, our near neighbor, does not have plant capacity to handle all their milk so some of that product has been coming over into this state and that’s keeping a lot of pressure on our plants to process all that product and to find homes for it. Michigan is in the process of trying to plan for new plants right now; they will get that, but the truth of the matter is that it will take a couple of years before the site’s actually chosen and the product and the people who are going to build the plant and operate it, so it doesn’t happen quickly. Plant capacity is both expensive and it takes a while to get in place.
Lorre Kolb: We’ve been visiting with Mark Stephenson, Center for Dairy Profitability, University of Wisconsin-Madison/Extension in the College of Agricultural and Life Sciences.